France's Business Elite Prepares for Political Volatility in New Era

France's Business Elite Prepares for Political Volatility in New Era

23 Jan, 2025

France’s business elite is increasingly concerned about political instability, inexperienced policymakers, and a potential surge in bankruptcies, as the nation heads into a decisive parliamentary election. Executives meeting in Aix-en-Provence, southern France, expressed unease over volatile politics and the rise of both far-right and far-left factions. Corporate leaders, who have largely benefited from President Emmanuel Macron’s pro-business reforms since 2017, fear these reforms could be rolled back.

Both the far-right National Rally (RN) and left-wing parties are pushing to undo key aspects of Macron’s policies, such as raising the retirement age and eliminating a wealth tax on financial assets. With polls predicting a decisive defeat for Macron’s party, business leaders are preparing for a future where reforms may stagnate. Ross McInnes, Chairman of aerospace giant Safran, highlighted the uncertainty, noting that the current election could signal the end of a decade-long reform cycle.

The potential rise of the far-right, which may secure the most seats in parliament but likely fall short of an outright majority, is causing further anxiety. This could lead to an unstable coalition government, exacerbating concerns about France’s political direction. Business leaders have also voiced worries about the inexperience of incoming policymakers, particularly if RN leader Jordan Bardella, at 28, becomes the youngest prime minister in French history.

The political uncertainty is already having economic ramifications. France’s borrowing costs have risen as investors demand higher risk premiums, and corporate investors are hesitant to make major decisions amidst the instability. The combination of political volatility and higher financing costs is expected to drive up corporate defaults, exacerbating the economic challenges facing businesses in France.

With both the far-left and far-right pushing for policies that could disrupt the business climate, the future remains uncertain for France’s economy and its corporate leaders.

 


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